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Dollar climbs to 11-day high

Author

bily

| Published on

April 20, 2018

The dollar headed higher against most rival currencies on Friday, lifted by rising U.S. Treasury yields, which came on the back of a rally in commodity prices that has pushed up inflation expectations.

The pound continued to slide after hints from Bank of England Governor Mark Carney that the U.K. central bank may hold off on raising interest rates next month.

What are currencies doing?

The ICE U.S. Dollar Index DXY, +0.23% rose 0.1% to 90.016, trading around its highest level since April 9, according to FactSet data. For the week, the index was set for a 0.2% gain, which would break a two-week losing run.

The pound GBPUSD, -0.1420% dropped to $1.4055, down from $1.4082 late Thursday in New York. Sterling earlier this week reached $1.4377, its highest level since the U.K.’s Brexit vote in June 2016, but was sent sharply lower late Thursday after dovish comments from the BOE’s Carney. The U.K. currency is now on track for a 1.3% weekly loss.

The euro EURUSD, -0.2916% dropped to $1.2311, compared with $1.2345 on Thursday.

The Japanese yen USDJPY, +0.22% also skidded, with the buck buying ¥107.61, compared with ¥107.37 on Thursday.

What is driving the market?

The dollar advance came as yields on U.S. government paper continued to rise on Friday, as the rate on 10-year notes TMUBMUSD10Y, +0.20% crept closer to the psychologically important 3% level.

The yield gains came as inflation expectations increased, following a rally in oil and metals prices this week. Higher inflation could put more pressure on the Federal Reserve to speed up the pace of interest rate hikes, which theoretically would be supportive for the dollar.

Meanwhile, the pound took a beating after Carney, in a BBC interview out late Thursday, highlighted a recent run of disappointing economic data and indicated a BOE interest rate hike in May is not a foregone conclusion. Market expectations for a rate rise next month dropped to below 50% after his comments, down from above 80% earlier in the week, according to Bloomberg.

Which events could move markets on Friday?

Capping off a busy week of Fed speakers, Chicago Fed President Charles Evans will talk about the economic outlook to the Graaskamp Center Spring Board Conference at 9:40 a.m. Eastern.

The dollar headed higher against most rival currencies on Friday, lifted by rising U.S. Treasury yields, which came on the back of a rally in commodity prices that has pushed up inflation expectations.

The pound continued to slide after hints from Bank of England Governor Mark Carney that the U.K. central bank may hold off on raising interest rates next month.

What are currencies doing?

The ICE U.S. Dollar Index DXY, +0.23% rose 0.1% to 90.016, trading around its highest level since April 9, according to FactSet data. For the week, the index was set for a 0.2% gain, which would break a two-week losing run.

The pound GBPUSD, -0.1420% dropped to $1.4055, down from $1.4082 late Thursday in New York. Sterling earlier this week reached $1.4377, its highest level since the U.K.’s Brexit vote in June 2016, but was sent sharply lower late Thursday after dovish comments from the BOE’s Carney. The U.K. currency is now on track for a 1.3% weekly loss.

The euro EURUSD, -0.2916% dropped to $1.2311, compared with $1.2345 on Thursday.

The Japanese yen USDJPY, +0.22% also skidded, with the buck buying ¥107.61, compared with ¥107.37 on Thursday.

What is driving the market?

The dollar advance came as yields on U.S. government paper continued to rise on Friday, as the rate on 10-year notes TMUBMUSD10Y, +0.20% crept closer to the psychologically important 3% level.

The yield gains came as inflation expectations increased, following a rally in oil and metals prices this week. Higher inflation could put more pressure on the Federal Reserve to speed up the pace of interest rate hikes, which theoretically would be supportive for the dollar.

Meanwhile, the pound took a beating after Carney, in a BBC interview out late Thursday, highlighted a recent run of disappointing economic data and indicated a BOE interest rate hike in May is not a foregone conclusion. Market expectations for a rate rise next month dropped to below 50% after his comments, down from above 80% earlier in the week, according to Bloomberg.

Which events could move markets on Friday?

Capping off a busy week of Fed speakers, Chicago Fed President Charles Evans will talk about the economic outlook to the Graaskamp Center Spring Board Conference at 9:40 a.m. Eastern.

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